Bloomberg News

Phoenix Solar Drops Most Since 2004 on Lower Profit Outlook

October 12, 2011

(Updates with company comment in fourth paragraph.)

Oct. 12 (Bloomberg) -- Phoenix Solar AG, which builds and sells solar plants, had a record decline in Frankfurt trading after cutting its full-year sales and earnings outlook.

Phoenix Solar plunged as much as 27 percent, the steepest intraday decline since November 2004, and was at 6.463 euros as of 11:10 a.m. local time. The shares have lost 73 percent of their value this year.

Consolidated losses before interest and tax are expected to be 42 million euros ($58 million) to 49 million euros in 2011, the Sulzemoos, Germany-based company said today in a statement. Revenue is seen at 350 million to 400 million euros.

German solar companies including Solarworld AG, Q-Cells SE and Conergy AG have been struggling to deal with weakening demand in Germany, which has cut subsidies twice since June 2010. They’re also under pressure from Chinese manufacturers that boosted production capacity just as demand slowed, causing cell and module prices to plummet.

“The primary cause of the now expected high losses is the writedown of inventories resulting from the continuing decline in the market price for solar panels,” Phoenix Solar said today. “The change in outlook reflects a weaker-than-expected market recovery in the second half of 2011, particularly in Germany.”

The company said it didn’t expect a year-end rally in Germany, which added a record 7,400 megawatts of panels in 2010 on surging sales in the final months of the year.

The new forecast is “way below expectations,” and a “negative read-across for the entire sector,” Sven Kuerten, an analyst at DZ Bank AG in Frankfurt, said in an e-mailed note.

Phoenix Solar said it would analyze “potential adjustments” to its business model and is looking to cut costs to return to profitability in fiscal 2012.

SMA Solar Technology AG, Germany’s biggest solar company by market value, fell 6 percent, while Solarworld retreated 5 percent.

--With assistance from Julie Cruz in Frankfurt. Editors: Stephen Cunningham, Amanda Jordan.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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